No balancing act

Doug Horner, the Alberta government's president of the Treasury Board and minister of finance, speaks with media at the McDougall Centre in downtown Calgary, Alta. on Tuesday, Feb. 19, 2013. (QMI Agency/LYLE ASPINALL)

“Bitumen bubble” or “revenue rollercoaster,” call it what you will, the failure of the Alberta government to balance its budget for five consecutive years (with a sixth likely to follow next year) cannot be blamed on the fluctuations of a resource-based economy. It is entirely the result of successive Tory governments failing to hold the line on spending.

On Tuesday, Alberta Finance Minister Doug Horner released the province’s third-quarter fiscal update. Since his predecessor introduced the last provincial budget almost exactly a year ago, the financial position of the Alberta government has deteriorated by nearly $3 billion.

In Feb. 2012, the deficit was projected to be only about $900 million. As of Tuesday, Horner now expects the province to be $3.5 billion to $4 billion in the red by the end of the fiscal year on March 31.

Of course, as he and Premier Alison Redford have been doing for months now, Horner blamed the province’s slide on “global economic uncertainty” and “a growing discount on Alberta bitumen prices.” This is Tory shorthand for, “It’s not our fault.”

But it is their fault.

According to a new study by the Fraser Institute’s Calgary director, Mark Milke, if the Alberta government had merely held spending increases to the rate of inflation and population growth, it “would have run a surplus budget in every budget year since 2005, including during the 2008/09 recession.”

Rather than at least six years of deficits that will drain the Sustainability Fund completely later this year, Alberta could have had no deficits – not one – if it had raised spending only as much as inflation increased and the province’s population grew.

First the government of Premier Ed Stelmach refused to hold per capita spending at 2005 levels, and now the Redford government is doing the same.

To the credit of Horner and Redford, on Tuesday they announced a three-year freeze on the pay of senior government managers and a 10% reduction in the number of managers over the same period. Plus they have also found nearly $300 million in net savings so far this year – no mean feat for government hopelessly addicted to the highest levels of public spending in the country.

But those are almost meaningless.

As the Fraser Institute’s Milke points out, spending on welfare has risen from $971 per capita in 2005 to $1,225 today, that’s “growth of 26.1%, even after accounting for inflation and population growth.”

Why has that been necessary? During those eight years, Alberta has led the country in job creation, economic growth, increases in government revenues, housing starts, retail sales and a whole host of other positive factors. Nearly every year since 2005, Alberta has created the most jobs in the country and had the lowest unemployment rate. Why, then, would our welfare budget have grown by more than a quarter?

Grade school budgets have risen by 2% more than needed to cover inflation and population growth; spending on colleges, universities and technical schools has grown 11% faster.

Overall, provincial spending has gone from $27.0 billion in 2005 to more than $41 billion this year – in just eight years.

It’s true that technically this year’s $3.5 to $4.0 billion deficit is almost all the result of lower-than-expected resource revenues. But, as Milke explains, the overspending came first.

Had the Tories grown their spending only as much as needed to cover inflation and population growth since 2005, they would have had a surplus of $3.6 billion this year, despite the drop in the price for our oil.

The Tory government is in a mess because of their own bad management, not because of price fluctuations beyond their control.

Poll

Does responsibility for Alberta's economic situation lie with the governement?

No balancing act

“Bitumen bubble” or “revenue rollercoaster,” call it what you will, the failure of the Alberta government to balance its budget for five consecutive years (with a sixth likely to follow next year) cannot be blamed on the fluctuations of a resource-based economy. It is entirely the result of successive Tory governments failing to hold the line on spending.

On Tuesday, Alberta Finance Minister Doug Horner released the province’s third-quarter fiscal update. Since his predecessor introduced the last provincial budget almost exactly a year ago, the financial position of the Alberta government has deteriorated by nearly $3 billion.